Written by
Victoria Wells
Principal & Web3 Legal Lead
Published on
Jan 18, 2026
Summarize this article with
The UAE stablecoin market has matured rapidly, with compliance now mandatory across all major jurisdictions. The CBUAE's Payment Token Services Regulation transition period ended in August 2025, meaning issuers can no longer operate in regulatory grey areas. If you're planning to issue a stablecoin targeting UAE users, here's what you actually need to know.
Quick Reality Check: What They Don't Tell You
"Simple licensing process"? You're navigating three separate regulators with overlapping but distinct requirements
AED-pegged stablecoins? CBUAE has exclusive jurisdiction - VARA won't touch them
Capital requirements? Range from AED 1.5M (VARA) to AED 15M+ (CBUAE) depending on structure
Foreign stablecoin issuers? Registration is mandatory, but retail payment use is heavily restricted
Algorithmic stablecoins? Banned across all UAE jurisdictions. Full stop.
Timeline expectations? Budget 6-12 months for full licensing, not the "few weeks" some consultants promise
The global stablecoin market has exploded past $264 billion, and the UAE wants its share - but only from compliant operators. This checklist breaks down exactly what's required across CBUAE, VARA, and FSRA frameworks.
Quick Navigation
UAE Regulatory Framework Overview
Stablecoin issuers in the UAE face a three-regulator landscape, each with distinct mandates and requirements. Understanding which regulator governs your token is the first critical decision.
Regulator Jurisdiction Map
Regulator | Geographic Scope | Token Types | Primary Focus |
|---|---|---|---|
CBUAE | UAE mainland (excluding financial free zones) | AED-pegged Payment Tokens, Foreign Payment Tokens | Payment services, retail transactions |
VARA | Dubai (excluding DIFC) | Fiat-Referenced Virtual Assets (FRVAs) - non-AED only | Virtual asset ecosystem, trading/settlement |
FSRA (ADGM) | Abu Dhabi Global Market | Fiat-Referenced Tokens (FRTs) | Institutional/payments-grade issuance |
DFSA (DIFC) | Dubai International Financial Centre | Fiat Crypto Tokens (recognition only) | Securities-grade services |
Critical distinction: If your stablecoin references the UAE Dirham, CBUAE has exclusive licensing authority regardless of where you incorporate. VARA explicitly excludes AED-pegged tokens from its FRVA approval process.
Key Regulatory Milestones
Date | Development | Impact |
|---|---|---|
June 2024 | CBUAE Payment Token Services Regulation issued | Established licensing framework for stablecoins |
August 2025 | PTSR transition period ended | Full compliance now mandatory |
May 2025 | VARA VA Issuance Rulebook activated | FRVA/ARVA rules became effective |
December 2024 | ADGM FRT issuance framework introduced | New regulated activity for stablecoin issuance |
January 2026 | ADGM FRT framework amendments effective | Expanded scope of FRT-related activities |
For comprehensive jurisdiction comparisons, see our analysis of EU vs UAE regulations and ADGM licensing categories.
Licensing Requirements by Regulator
Securing the right licence is the first step for any stablecoin issuer targeting UAE users. Getting this wrong leads to launch delays or outright rejection.
CBUAE Payment Token Services Licensing
The CBUAE requires licensing for three core activities:
License Category | Activities Covered | Key Requirements |
|---|---|---|
Payment Token Issuance | Creating and managing AED or foreign-currency stablecoins | UAE incorporation, capital requirements, reserve management |
Payment Token Conversion | Exchanging tokens for fiat, crypto, or other tokens | Licensed entity status, AML/CFT compliance |
Payment Token Custody & Transfer | Safekeeping and movement of tokens | Segregated accounts, cybersecurity framework |
Who needs CBUAE licensing?
Any entity issuing Dirham Payment Tokens (AED-pegged stablecoins)
Foreign Payment Token Issuers seeking UAE registration
VASPs providing custody, transfer, or conversion services for payment tokens
Entities licensed by VARA or SCA must obtain a Non-Objection Registration (NOR) from CBUAE to continue providing stablecoin-related services.
VARA FRVA Licensing (Dubai)
VARA's Virtual Asset Issuance Rulebook (effective May 2025) classifies stablecoins as Fiat-Referenced Virtual Assets (FRVAs) under Category 1 VA Issuance:
Requirement | Details |
|---|---|
License Type | Category 1 VA Issuance |
Capital | AED 1,500,000 + 2% of circulating FRVA value |
Reserve Backing | 100% in legally segregated accounts |
Redemption | T+1 (one working day), no fees permitted |
Audits | Monthly verification of circulation and reserves |
Prohibited | AED-referenced tokens (CBUAE jurisdiction), algorithmic tokens |
Use restrictions: FRVAs issued under VARA may only be used for purchase/sale of assets within the virtual asset ecosystem - not for general UAE payments.
For detailed VARA fee structures, see our VARA license cost breakdown.
ADGM FSRA FRT Framework
The FSRA treats stablecoin issuance as a distinct regulated activity under its December 2024 framework:
Aspect | Requirement |
|---|---|
Regulated Activity | "Issuing a Fiat-Referenced Token" |
Full Backing | 1:1 by same fiat currency referenced |
Redemption Standard | At par, no later than T+2 post-CDD completion |
Reserve Attestation | Monthly independent attestations |
Annual Audit | External audit of reserves required |
Accepted FRT List | Foreign FRTs must meet FSRA acceptance criteria |
The FSRA's January 2026 amendments expanded regulated activities involving FRTs to include custody, payment services, and a new "FRT Intermediation" activity.
For ADGM company formation guidance, see our Abu Dhabi resources.
DIFC DFSA Recognition
The DFSA does not license stablecoin issuance within DIFC. Instead, it operates a recognition regime:
Only DFSA-recognised "Fiat Crypto Tokens" may be used in regulated financial services
Recognition requires evidence of strong reserves, daily valuations, monthly verification
Foreign-issued stablecoins meeting recognition criteria can be used by DIFC-authorised firms
For DIFC licensing costs and requirements, see our detailed guide.
Capital Requirements Comparison
Capital requirements vary significantly between UAE regulators and depend on your specific activities. Here's the reality:
Capital Requirements by Regulator and Activity
Regulator | Activity | Minimum Capital | Variable Component |
|---|---|---|---|
CBUAE | Payment Token Issuance | AED 15,000,000 | + 0.5% of outstanding token value* |
CBUAE | Alternative Reserve Structure | AED 15,000,000 | + 2% of outstanding token value |
VARA | FRVA Issuance (Category 1) | AED 1,500,000 | + 2% of circulating FRVA value |
FSRA | FRT Issuance | Activity-dependent** | Based on prudential calculations |
FSRA | FRT Intermediation | USD 50,000 base | Plus conduct requirements |
FSRA | VA Custody (incl. FRTs) | USD 250,000 BCR | Or 6 months' operational expenses |
*Standard reserve structure with bank-held assets **FSRA capital varies by activity combination and risk profile
The Hidden Capital Reality
What the official requirements don't tell you:
Factor | Impact |
|---|---|
Liquidity Buffer | VARA requires Net Liquid Assets ≥ 1.2x monthly operating expenses |
Reserve Segregation | Capital for reserves is additional to regulatory capital |
Banking Relationships | UAE banks often require additional deposits/guarantees |
Insurance Requirements | Professional indemnity adds ongoing costs |
Opportunity Cost | Locked capital earns minimal returns while competitors deploy theirs |
For a complete cost analysis, see The Real Cost of a VARA License.
Reserve and Backing Requirements
UAE regulators mandate strict 1:1 reserve backing to ensure full redeemability. No fractional reserves, no algorithmic mechanisms, no exceptions.
Reserve Composition Rules
Regulator | Reserve Composition | Segregation | Maturity |
|---|---|---|---|
CBUAE (Non-bank) | 100% cash in segregated escrow | Mandatory UAE-based | N/A (cash only) |
CBUAE (Bank subsidiary) | 50% cash, 50% UAE gov bonds/CBUAE bills | Mandatory | ≤ 6 months |
VARA | Cash/cash equivalents, legally segregated | Bankruptcy-remote | As prescribed |
FSRA | High-quality liquid assets, same currency | Regulated custodians | Daily valuation |
Redemption Standards
Jurisdiction | Redemption Timeline | Redemption Fees | Verification |
|---|---|---|---|
CBUAE | On demand at par value | Restrictions apply | Monthly audits |
VARA | T+1 (one working day) | Prohibited | Monthly audits |
FSRA | T+2 post-CDD completion | At par value | Monthly attestations |
November 2025 milestone: Zand Bank launched the UAE's first regulated AED-backed stablecoin on a public blockchain, with 1:1 backing verified through independent audits and reserves held in segregated accounts.
For related frameworks, see our guides on security tokens and real estate tokenization.
AML/CFT and KYC Compliance
The UAE has adopted a strict no-tolerance policy toward anonymity in virtual asset transactions. Federal Decree-Law 2025 on AML/CFT imposes comprehensive requirements on stablecoin issuers.
Prohibited Token Types
All UAE regulators explicitly ban:
Token Type | Reason | Consequence |
|---|---|---|
Privacy Coins (Monero, Zcash, etc.) | Anonymity features | License rejection/revocation |
Algorithmic Stablecoins | No full collateralization | Not eligible for licensing |
Pseudonymous Tokens | Cannot verify beneficial ownership | Prohibited from UAE use |
KYC and CDD Requirements
Component | Requirement | Documentation |
|---|---|---|
Identity Verification | Emirates ID, biometric checks | Government-issued ID, facial recognition |
Source of Funds | Document origin of assets | Bank statements, income verification |
Ultimate Beneficial Owners | Identify controlling parties | Ownership structure, control documentation |
Ongoing Monitoring | Continuous risk assessment | Transaction monitoring systems |
Sanctions Screening | UN Consolidated List, UAE Local Terrorist List | Automated screening systems |
FATF Travel Rule Compliance
All stablecoin transfers must comply with the FATF Travel Rule, requiring:
Originator information (name, account number, address/national ID/customer ID/date of birth)
Beneficiary information (name, account number)
Transmission to beneficiary's VASP before or concurrent with transfer
VARA mandates the use of distributed ledger analytics tools for transaction monitoring and wallet screening.
Reporting Obligations
Report Type | Trigger | Recipient | Timeline |
|---|---|---|---|
STR/SAR | Suspicious activity detected | UAE Financial Intelligence Unit | Promptly |
Transaction Records | All transactions | Internal records | Retain 5+ years |
Data Validation | Monitoring system integrity | CBUAE | Every 12-18 months |
Warning: "Tipping off" - informing customers that an STR has been filed - is a criminal offence under UAE law.
Operational and Cybersecurity Requirements
Stablecoin issuers must establish robust operational systems to safeguard consumers and secure digital infrastructure. Board-level oversight is mandatory.
Technology Governance Framework
VARA's updated 2.0 rules mandate implementation of a Technology Governance and Risk Assessment Framework (TGRAF):
Component | Requirement |
|---|---|
Board Responsibility | Ultimate accountability for tech risk management |
IT Controls | Commensurate with operational scale |
Cyber Resilience | UAE Information Assurance Standards compliance |
Security by Design | Integrated from early development stages |
Independent Audits | Regular technology audits required |
Cybersecurity Minimum Standards
Measure | Specification |
|---|---|
Authentication | Multi-factor authentication (MFA) mandatory |
Encryption | End-to-end encryption for customer data |
Privileged Access | Strong passwords, no account sharing, full logging |
Fraud Detection | Real-time monitoring, high-risk transaction screening |
Penetration Testing | Risk-based schedule, cyber-attack simulations |
Incident Response | Documented plan, rapid isolation capabilities |
Breach Reporting | Major incidents reported to Central Bank immediately |
For VARA security standards specific to VASPs, see our detailed guide.
Consumer Protection Standards
Consumer protection sits at the core of UAE stablecoin regulation. Issuers must meet strict transparency and redemption requirements.
White Paper Requirements
Every stablecoin issuer must publish a comprehensive white paper covering:
Section | Required Content |
|---|---|
Stabilisation Mechanism | How stable value is maintained |
Holder Rights | Redemption rights, procedures, timelines |
Investment Risks | Clear risk disclosures |
Audit Results | Reserve verification outcomes |
Technical Documentation | Smart contract details, security assessments |
White papers must be submitted and approved by regulators at least seven days before token launch.
Marketing Restrictions
Restriction | Scope |
|---|---|
Licensed Promoters Only | Only licensed entities may promote stablecoins |
No "Legal Tender" Claims | Cannot imply government backing |
Sponsorship Disclosure | Third-party promoters must disclose relationships |
VARA Registration | All Dubai-based influencers must be registered |
No Misleading Claims | Factual accuracy mandatory |
Deposit Protection | Must state tokens are NOT protected by deposit guarantee schemes |
For guidance on UAE ICO marketing compliance, see our resource.
Foreign Issuer Registration
Foreign issuers targeting UAE users must register as a "Registered Foreign Payment Token Issuer" with CBUAE.
Foreign Payment Token Restrictions
Aspect | Requirement |
|---|---|
Registration | Mandatory CBUAE registration |
Permitted Use | Purchasing virtual assets or derivatives only |
Prohibited Use | General merchant transactions, retail payments |
Full UAE License | Required for retail payment acceptance |
White Paper | CBUAE approval, 7-day pre-publication |
Exemptions for Foreign Registrants
Registered Foreign Payment Token Issuers are exempt from:
Articles 33-36 (internal governance and risk management)
They must still comply with:
Reserve backing requirements
Redemption rights provisions
Audit obligations
AML/CFT requirements
Example: In 2025, global exchanges including Crypto.com, OKX, and Bybit obtained VASP licences enabling expanded UAE services. Tether's USDt and Ripple's RLUSD gained ADGM recognition as accepted fiat-referenced tokens.
For more on crypto exchanges in UAE, see our licensing guide.
Compliance Checklist Summary
Your compliance roadmap depends on your token type and target market. Here's the decision framework:
Step 1: Classify Your Token
Token Type | Primary Regulator | Secondary Considerations |
|---|---|---|
AED-pegged stablecoin | CBUAE (exclusive) | Cannot use VARA |
USD/EUR/other fiat stablecoin | VARA (Dubai) or FSRA (ADGM) | CBUAE registration if targeting mainland |
Multi-currency basket token | FSRA (institutional) | Complex reserve requirements |
Foreign-issued stablecoin | CBUAE registration | Use restrictions apply |
Step 2: Meet Capital Requirements
Regulator | Minimum Capital | Ongoing Requirements |
|---|---|---|
CBUAE | AED 15,000,000 + percentage | Maintain throughout operations |
VARA | AED 1,500,000 + 2% of circulation | Adjust as supply grows |
FSRA | Activity-dependent | Prudential calculations apply |
Step 3: Establish Reserve Infrastructure
[ ] 100% reserve backing in qualifying assets
[ ] Segregated accounts with regulated UAE banks/custodians
[ ] T+0 reconciliation across ledgers, wallets, and bank accounts
[ ] Monthly independent audit arrangements
[ ] Redemption mechanism meeting T+1 (VARA) or T+2 (FSRA) standards
Step 4: Implement AML/CFT Framework
[ ] KYC/CDD procedures including Emirates ID verification
[ ] Transaction monitoring with on-chain analytics
[ ] FATF Travel Rule compliance
[ ] Sanctions screening against UN and UAE lists
[ ] STR/SAR reporting procedures
[ ] Staff training on AML obligations
Step 5: Prepare Documentation
[ ] Audited white paper with VARA/CBUAE approval
[ ] Risk disclosure statements
[ ] Business continuity plan
[ ] Cybersecurity framework documentation
[ ] Incident response procedures
Step 6: Ongoing Compliance
Requirement | Frequency | Responsible Party |
|---|---|---|
Reserve verification | Monthly | Independent auditor |
Transaction monitoring | Real-time | Compliance team |
Sanctions list updates | As published | MLRO |
Regulatory reporting | As prescribed | CFO/Compliance |
White paper updates | Material changes | Legal counsel |
Penetration testing | Risk-based | IT Security |
For tokenization compliance frameworks, see our detailed guide.
Frequently Asked Questions
What are the licensing requirements for stablecoin issuers in the UAE?
Requirements depend on your token type. AED-pegged stablecoins require exclusive CBUAE licensing. Foreign-currency stablecoins can be licensed through VARA (Dubai) or FSRA (ADGM). All issuers need UAE incorporation, robust AML/CFT frameworks, and compliance with capital and reserve requirements specific to their chosen regulator.
Can I issue an AED-backed stablecoin through VARA?
No. VARA explicitly excludes AED-referenced tokens from its FRVA approval process. Only CBUAE has authority to license Dirham Payment Tokens. This is a common misconception that causes significant delays when issuers apply to the wrong regulator.
What happens if I operate without proper licensing?
Operating payment token services without CBUAE licensing or registration is prohibited under the Payment Token Services Regulation. Violations may result in administrative and financial sanctions, cease-and-desist orders, and potential criminal penalties under UAE financial services law.
Are algorithmic stablecoins permitted in the UAE?
No. All UAE regulators (CBUAE, VARA, FSRA) explicitly prohibit algorithmic stablecoins that maintain price stability through token burning/minting mechanisms without full collateralization. This ban followed the May 2022 Terra collapse.
What reserve requirements apply to stablecoin issuers?
All UAE frameworks require 100% reserve backing. CBUAE mandates AED reserves in segregated escrow for non-bank issuers. VARA requires legally segregated, bankruptcy-remote reserves. FSRA requires high-quality liquid assets denominated in the same currency as the token.
How long does the licensing process take?
Budget 6-12 months for complete licensing. CBUAE processing times are not yet publicly established as the regime is new. VARA licensing typically takes 4-8 months for prepared applicants. FSRA timelines vary by complexity. Having complete documentation from day one significantly reduces delays.
Can foreign stablecoin issuers target UAE users?
Yes, through CBUAE registration as a "Registered Foreign Payment Token Issuer." However, foreign payment tokens can only be used for purchasing virtual assets or derivatives - not for general retail payments at UAE merchants. Full CBUAE licensing is required for retail payment functionality.
What are the redemption requirements?
Redemption must be available at par value (1:1). VARA requires T+1 settlement with no redemption fees. FSRA allows T+2 post-CDD completion. CBUAE requires on-demand redemption with reserves sufficient to honour all outstanding tokens.
Do I need separate AML/CFT compliance for each regulator?
The core AML/CFT obligations are similar across regulators, but implementation details differ. All require FATF Travel Rule compliance, transaction monitoring, and STR reporting to the UAE Financial Intelligence Unit. VARA specifically mandates distributed ledger analytics tools.
What capital do I need to start?
Minimum capital ranges from AED 1.5 million (VARA FRVA issuance) to AED 15 million (CBUAE Payment Token Issuance). Additional capital equal to a percentage of outstanding tokens is required as circulation grows. Budget for the higher end and factor in opportunity costs of locked capital.
Next Steps: Launch Your Compliant Stablecoin
Stablecoin issuance in the UAE offers significant opportunity, but the regulatory landscape is complex. With three overlapping jurisdictions, strict reserve requirements, and comprehensive AML/CFT obligations, getting expert guidance from day one saves time and prevents costly mistakes.
Why Choose Ape Law for Stablecoin Compliance
We've guided multiple stablecoin and tokenization projects through UAE regulatory frameworks. Our expertise spans:
Regulator Navigation: Deep understanding of CBUAE, VARA, and FSRA requirements and how they interact
Structure Optimization: Choosing the right jurisdiction and entity structure for your specific use case
Documentation Preparation: White papers, reserve frameworks, and compliance manuals that meet regulatory expectations
Ongoing Support: Post-launch compliance monitoring and regulatory updates
Our Stablecoin Project Experience
While client confidentiality prevents naming specific projects, we've helped launch:
Foreign-currency stablecoin projects navigating VARA and CBUAE dual requirements
Institutional FRT issuance frameworks under FSRA supervision
Cross-border stablecoin structures optimizing for UAE market access
Ready to Launch Your Stablecoin?
Don't navigate three regulatory frameworks alone. Our team combines deep regulatory knowledge with practical implementation experience to ensure your stablecoin launches compliantly and maintains ongoing compliance.
Schedule Your Consultation Today
Get a customized compliance roadmap for your stablecoin project, including:
Jurisdiction recommendation based on your token design and target market
Detailed capital and reserve structure planning
Licensing timeline with realistic milestones
AML/CFT framework tailored to your operational model
Book Your Stablecoin Compliance Consultation or email us at launch@ape.law
Additional Resources
Disclaimer: This guide reflects regulations as of January 2026. UAE stablecoin and virtual asset regulations continue to evolve rapidly. Always consult with qualified legal counsel before making licensing or operational decisions. The information provided here is for educational purposes and does not constitute legal advice.
Ape Law is a Web3-native legal firm specializing in cryptocurrency and blockchain regulations in the UAE. We provide comprehensive legal support for stablecoin issuance, VASP licensing, and ongoing regulatory compliance.
